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More about pay-as-you-earn provisional tax, and your questions, answered.

The deadline to pay provisional tax using the Accounting Income Method (AIM) is June 28. Make sure you file before then, or you’ll miss out until 2019.

What you need to know

Since April 2018, businesses have been able to choose to use their accounting software to calculate how much provisional tax to pay for each filing period.

May 28 was the first AIM payment date for monthly GST filers.

June 28 is the first payment date for two- and six-monthly GST filers, and those not registered for GST.

If you don’t meet this June deadline, you won’t be able to start using AIM until next year.

woman on laptop

Case study

AIM for June

June runs a florist shop. She’s worked out with her accountant that she’ll pay GST six-monthly. She uses accounting software, and wants to set up and use AIM to simplify her provisional tax payments.

This means she’ll need to file before 28 June 2018, or she won’t be able to start using AIM until the start of the 2019 financial year.

AIM makes managing cash flow simpler because provisional tax payments are based on a business’s actual results, rather than on the previous year’s earnings or estimated earnings for the current year. And if your income drops during the year, you get an automatic refund of any overpaid tax.

If your business is new, growing, has irregular or seasonal income, or if you find it difficult to forecast your income accurately, AIM could be very helpful.

Talk to your software provider or tax agent about whether AIM is right for your business.

Accounting Income Method (external link) — Inland Revenue

Your questions, answered

Our February article about AIM generated a lot of questions. We’ve worked with Inland Revenue to bring you the answers.

Can I do this if I don’t have accounting software?

AIM is available only through AIM-capable accounting software. Any software provider can develop AIM-capable software.

So far, Inland Revenue has worked with Xero, Reckon and MYOB in the development of AIM software.
If your provider isn’t currently offering AIM-capable software, ask them when they will offer it.

How does this apply to contractors?

AIM could be particularly helpful for contractors and sole traders because these types of businesses often have difficulty estimating how much their income will be in the current tax year.

What about people who occasionally earn money from odd jobs?

AIM is suitable for businesses with a fluctuating income as you only pay when you’re making a profit. In general, if you’re paying provisional tax and have a turnover of less than $5m, AIM could be an option for you.

Will the ratio option still be available?

Yes – the three other methods for managing provisional tax - the ratio option, the estimation option and the standard option - are all still available.

Why the $5 million cut-off?

AIM is designed for small businesses with a simple structure that use standard software packages. This may be reviewed in the future.

What do I need to do now? Does IRD need to know I plan to move to pay-as-you-go provisional, and if so, how do I tell them?

Set up AIM in your software and submit your Statement of Activity to Inland Revenue on the due date. You don’t need to do anything else.

AIM provisional tax (external link) – Inland Revenue

Do you have more questions about AIM?

Do you have more questions about AIM?

Contact Inland Revenue by email at IRTransformation@ird.govt.nz

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